The use of digital technologies to tackle financial exclusion

The Centre for Social Justice (CSJ) hosted a roundtable discussion in July 2016 to discuss how digital skills and technology can help tackle the problem of financial exclusion. The roundtable was attended by key personnel from Government, financial services and the third sector. Here are some extracts from their report:

A 2011 Government report estimated that 9 million people across the UK remain underserved by mainstream retail banking services. 1.54 million of this group ‘do not have a transactional current account’. Over a third of ‘unbanked households’ are in the bottom income quintile, where the majority of income is via benefit payments.

Such ‘financial exclusion’ is a hallmark symptom of low income, welfare dependency, and poverty. Financially excluded individuals and households are more likely to have low levels of financial literacy, and remain vulnerable to loan sharks, payday lenders, and incurring crippling debt.

New digital technologies are increasingly being used to tackle financial exclusion. These include the use of pre-paid cards, budgeting apps and simplified current accounts designed for lower income and less financially stable households. The Government has also looked at how digitisation of public services can reduce financial exclusion.

New technology is an obvious solution to the problem of financial exclusion. Yet there is a problem: this solution is only available to those who possess the digital skills required to access it. The increasing number of both banking and welfare services that can only be accessed online via a computer has exposed the problem of low digital skills attainment. New evidence suggests the UK is facing a digital skills crisis, with 12.6 million people reported to have poor digital skills and 5.8 million people reported not to have ever used the internet.

Problems seen were:

A lack of trust, capability, and capacity prevent individuals from engaging with technology that prevents financial exclusion.